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Lord Tordoff: My Lords, before the Minister replies, I wish to make a remark which I hope is not trivial. I congratulate the noble Lord, Lord Jenkin, on using the words "one thousand million" and "two thousand, five hundred million" rather than referring to those
Lord Sainsbury of Turville: My Lords, I thank the noble Lord, Lord Jenkin, for tabling these amendments and for giving me the opportunity to clarify a little further our intentions in relation to this clause. I shall try to give him the best information that we have at this stage. However, I should say, first, that our recent support took the form only of a temporary loan. We are striving to achieve a restructuring of British Energy which, once the burden of the nuclear liabilities has been removed and alongside the restructuring of the company's debt, should mean that the company is financially viable, with no ongoing need of a subsidy for future operations. On that basis, British Energy's nuclear stations should be economic, even at the current low electricity prices.
I turn now to the detail of what we think government expenditure is likely to be. Amendment No. 2 refers to expenditure under subsection (1)(a). Perhaps it would be useful to remind noble Lords of the main areas in which we think we would use this provision and how we foresee it working.
The first area is in relation to our loan to the company while the restructuring plan is put in place. The figure of £700 million referred to in the amendment is, I think, a reference to the loan facility that we have in place with British Energy. This loan facility was previously subject to a limit of £650 million. That figure was always a maximum limit. There was no question of us simply handing over £650 million to the company to do with it as it saw fit. Rather, the loan facility was subject to various controls to ensure that the loan was the minimum necessary. Furthermore, following the sale of the company's stake in Bruce Power, it repaid the loan. We continue to make a facility available, but its total size has been significantly reduced to £200 million on a contingency basis in case of a requirement for further trading collateral or working capital.
The second anticipated use of the provision would be in funding an administration of the company if, for whatever reason, the restructuring plan failed. The Government have said previously that, under administration, they would make sufficient funding available to the administrator to enable him to continue running the company by providing a loan towards the working capital and collateral required for its electricity trading. Also, we would of course need to pay the extra costs incurred by the administrator in running the business.
It is difficult to put a precise figure on the cost involved in an administration. Key factors would be the length of time that the company was in administration and the complexity of the task. Clearly, it is our intention to try to minimise the costs as much as possible. That is one of the key reasons why we wanted to bring forward the provisions set out in Clause 1(1)(b) and (c) and in Clause 2. The better prepared we are for the possibility of acquiring the British Energy nuclear business from an administrator, the quicker the
The third anticipated use of the provision in subsection (1)(a) would be in funding a British Energy company if it had been acquired as described in paragraph (b)(i). At this point it is probably worth bringing in Amendment No. 3 since there is a close parallel. Amendment No. 3 deals with subsection (1)(b) and (c) which are contingency provisions aimed at ensuring that we have parliamentary authority to incur expenditure on acquiring British Energy's nuclear business and running it if that proves to be necessary. The power in subsection (1)(c) is analogous to the power in subsection (1)(a), but ensures that we could fund the company's nuclear business if we bought it through an asset purchase, as foreseen under paragraph (b)(ii).
Of course we have already made clear that the Government would contemplate acquiring British Energy's nuclear business only if the restructuring plan failed, the company went into administration and no other private sector purchaser came forward.
How much do we expect that to cost? In relation to the first elementthe acquisition costI should point out that the administrator would be under an obligation to the creditors to achieve fair value in any sale of the subsidiary companies or their assets. I do not intend to be drawn on a specific price, as that would inevitably be a matter for negotiations of a commercial nature with the administrator if it ever happened. However, I point out that in our view the fair value of the nuclear business would be low, given that the nuclear power stations currently have significant nuclear liabilities attached to them.
The second element is ongoing funding for the nuclear business if it were acquired back into the public sector. We would see that as a contingency measure. If it proved necessary to acquire the nuclear business, we would still need to develop a proper restructuring plan for it. I expect that that would be based on support for the historic nuclear liabilities of the business, similar to that currently envisaged. I explained in Committee that British Energy's estimate of its nuclear liabilities was £5.2 billion, discounted at 3 per cent, of which £2.1 billion is for the historic spent fuel.
That support is likely to be most suitably given under Schedule 12 to the Electricity Act 1989 rather than Clause 1 of the Bill, as it would be about nuclear liabilities. Even though the company might be in the public sector, the intention would still be that it should pay its own way going forward. It would be our intention that any support for the company under Clause 1 would be of a short-term nature, to allow the company to keep trading until the restructuring could be implemented. The amount would depend on the circumstances, but I expect that it would be along
That is about as much information as I am able to give at this stage. I hope that the noble Lord feels that his probing has produced the information that he wanted and that, on that basis, he will withdraw his amendment.
Lord Jenkin of Roding: My Lords, will the Minister give the House his viewit can be no more than a viewas to whether British Energy will be able to operate profitably with electricity at the price of about £16 per megawatt hour?
Lord Jenkin of Roding: My Lords, my amendment has produced much more information from the Government than we had hitherto. I am grateful to the Minister for that, and I beg leave to withdraw the amendment.
The point is quite a simple one. As we argued strongly both at Second Reading and in Committee, the use of the words "of any company" at the end of subsection (1) appears to leave it open to the Government to buy up any company that they wish in the industry. In Committee, and subsequently in correspondence and at our meeting on Tuesday, the Minister explained at great length that the provision would not be interpreted by the court as having that meaning. He also went on to make it very clear that the Government have no intention of buying up any other companies. Coming from him, we accept that that is their present position.
The provision is still open to the possibility that it may be misinterpreted, however. Amendment No. 7A is an attempt, following our discussion on Tuesday, to make it clear that the subsection is there to avoid the doubt that the repeal of the two sections of the 1989 Act could somehow have altered the Government's overall position as a purchaser of last resort. I will not press Amendment No. 7, but I want to move Amendment No. 7A. I beg to move.
Lord Sainsbury of Turville: My Lords, I thank the noble Lord for explaining his thinking behind the amendment. I also welcomed the opportunity to discuss informally with him and other noble Lords the concerns around Clause 2(1). I hope that I am right in saying that we have now come to a clear understanding about what we intend with the provision.
I shall make it absolutely clear. The Government will not gain any powers of compulsory purchase through the provisions in Clause 2(1). The creation of such powers would require a very clear and explicit provision. The purpose of lines 16 to 18 of page 2 is simply to clarify that the natural powers that the Government were able to exercise before the introduction of the Electricity Act 1989 are properly restored once its Sections 72 and 74 are repealed. However, we understand the noble Lord's concerns that that intention is not as clear as it might be in the Bill.
Amendment No. 7 would remove the clarification given by lines 16 to 18, and we would not agree to that, so I hope that it will be withdrawn. On the other hand, Amendment No. 7A simply serves to clarify our policy intentions. Although I do not think that it is strictly necessary, I recognise that it might help to meet the noble Lord's concerns and I am therefore content to accept it.
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